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Does Foreign Direct Investment Promote Regional Development in Developed Countries? A Markov Chain Approach for US States

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  • Bode, Eckhardt
  • Nunnenkamp, Peter

Abstract

This paper investigates the effects of inward FDI on per-capita income and growth of the US states since the mid-1970s. Using a Markov chain approach, it shows that both quantitative and qualitative characteristics of FDI affect per-capita income and growth. Employment-intensive FDI, concentrated in richer states, has been conducive to income growth, while capital-intensive FDI, concentrated in poorer states, has not. FDI has consequently tended to slow down rather than foster income convergence among US states. It appears to be less important whether FDI has been undertaken in the manufacturing sector of US states or in other sectors.

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Paper provided by Kiel Institute for the World Economy (IfW) in its series Open Access Publications from Kiel Institute for the World Economy with number 40022.

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Date of creation: 2010
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Handle: RePEc:zbw:ifwkie:40022

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Keywords: Markov transition probability ; likelihood ratio test ; FDI ; per-capita income ; regional development ; United States of America;

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Citations

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Cited by:
  1. Eckhardt Bode & Peter Nunnenkamp & Andreas Waldkirch, 2009. "Spatial Effects of Foreign Direct Investment in US States," Kiel Working Papers 1535, Kiel Institute for the World Economy.
  2. Elias Ajaga & Peter Nunnenkamp, 2008. "Inward FDI, Value Added and Employment in US States: A Panel Cointegration Approach," Kiel Working Papers 1420, Kiel Institute for the World Economy.
  3. Pandej Chintrakarn & Dierk Herzer & Peter Nunnenkamp, 2012. "Fdi And Income Inequality: Evidence From A Panel Of U.S. States," Economic Inquiry, Western Economic Association International, vol. 50(3), pages 788-801, 07.

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